SMB Training Blog

Some cool things about working at a prop firm

Yesterday was a really interesting day. Since we launched the options training program, I’ve been driving up to SMB from my home in Philadelphia almost every Wednesday.

I certainly have valid business reasons to be up there each week but honestly, my main motivation, is that I just love the environment. I really enjoy hanging out with other traders and exchanging information. I love CNBC going 24/7. I love the call outs that go on all day as the traders share information that they are picking up from the tape and their charts. I love Bella spontaneously calling a meeting of all traders to share something important that just happened in the market that he realized was a critical lesson for developing traders. I honestly have trouble, now that I’ve been exposed to it for a year, imagining a better environment in which to learn how to trade–but I’m a little biased.

Early in the day, Rick–an experienced systems trader at SMB–and I spent an hour cooking up a plan to use his system, which generates buy/sell signals to develop an approach to weekly options credit spreads in the various indices, ETFs and stocks that he follows. The basic concept was simple–when Rick’s secret sauce program generates a buy signal, we throw on a put credit spread. When it generates a sell signal we throw on a call credit spread. The early indications, which are hardly conclusive, were nonetheless pretty encouraging. We agreed to spend a lot more time back testing and refining the concept during the upcoming weeks. Who knows if this discussion will lead to something big or not, but I”m excited to find out.

At lunch, I met with my good friend Dave, who is a former options mentoring student of mine and an occasional guest on the Options Tribe. Dave and I have been in a dialogue about his most effective monthly options spread trades and how SMB could partner with him in leveraging his knowledge of those approaches. He’s constantly experimenting and refining his techniques and the data he records as he back tests and trades these strategies live is impressive.

Dave needed to trade in the afternoon, so we hooked him up to our internet connection and we sat together for a couple of hours trading and chatting. In the last hour leading up to the close, Bella was actively chatting to the rest of the traders calling out levels on the SPY and a particular stock that he and Shark were trading–ESRX. I told Dave to watch how this played out–he would learn something.

Bella called out to Shark–“hey Shark, you thinking of getting short at 43.50”? That sentence was in the form of a question, and I truly think that Bella meant it to be a teaching moment, but I think it’s meaning was a lot simpler : Shark, from my experience, it would be a good idea to get short at 43.50……

Shortly thereafter, Bella called out to Steve–“Spencer, those SPYs are really selling off”. Steve wanted to know if there was a meaningful accompanying volume. I checked out the SPY chart and neither the volume at that moment, nor the minor red candle that was developing looked that meaningful at all to me. I suspected that Bella picked up something on the tape that caused him to call this out. I turned to Dave and said–“check this out. Draw a line on your SPY chart right now and let’s see what happens”. Sure enough, the next five or so candles were pronounced red candles with lots of volume. I told Dave–“I’ve been watching this happen for a year. It’s pretty amazing to be in this environment.” After the close Bella, Dave and I chatted. He confirmed that the tape was the “tell” on what was going to happen to the SPYs as they sold off late in the day. Dave and I chatted some more about the value of having such meaningful market information when trading directional options spreads.

At the end of the day I sent Rick a list of the weekly options that are offered by the CBOE and he agreed that he’d work over the weekend to try to pick the weekly options offerings that offered the most potential for our credit spread concept.

The point is not so much whether this particular idea pans out or is found to have a fatal flaw. What is important is that SMB has created an environment where an equity trader and an options spread trader can experiment together leveraging each other’s strengths. Every now and then, something great is going to emerge from that kind of cross-disciplinary collaboration. That’s what’s really important.

Seth Freudberg

Director, SMB Options Training Program

The SMB Options Training Program is a twelve month program designed for novice and intermediate level options traders who are seeking an intensive training process to learn how to trade options spreads for monthly income. For more information on this program contact Seth Freudberg: [email protected].